A precise balance between proliferation and differentiation must be maintained during neural development to obtain the correct proportion of differentiated cell types in the adult nervous system. The basic helix-loop-helix (bHLH) transcription factors known as E proteins and their natural inhibitors, the Id proteins, control the timing of differentiation and terminal exit from the cell cycle. Here we show that progression into S phase of human neuroblastoma cells is prevented by E proteins and promoted by Id2. Cyclin-dependent kinase inhibitors (CKI) have been identified as key effectors of cell cycle arrest in differentiating cells. However, p57^Kip2 is the only CKI that is absolutely required for normal development. Through the use of global gene expression analysis in neuroblastoma cells engineered to acutely express the E protein E47 and Id2, we find that p57^Kip2 is a target of E47. Consistent with the role of Id proteins, Id2 prevents activation of p57^Kip2 expression, and the retinoblastoma tumor suppressor protein, a known Id2 inhibitor, counters this activity. The strong E47-mediated inhibition of entry into S phase is entirely reversed in cells in which expression of p57^Kip2 is silenced by RNA interference. During brain development, expression of p57^Kip2 is opposite that of Id2. Our findings identify p57^Kip2 as a functionally relevant target recruited by bHLH transcription factors to induce cell cycle arrest in developing neuroblasts and suggest that deregulated expression of Id proteins may be an epigenetic mechanism to silence expression of this CKI in neural tumors.